Computer-implemented method and apparatus for adjusting the cost basis of a security

ABSTRACT

A computer-implemented method and apparatus for determining a cost basis associated with a plurality of shares of a security. In response to information identifying an issuer, the purchase date and the sale date, a list of capital events that occurred in connection with the security between the purchase date and the sale date is retrieved from a database. One or more shares held adjustment ratios are then retrieved from a database. Each of the shares held adjustment ratios corresponds to one of the capital events that occurred in connection with the security between the purchase date and the sale date. A current cost basis associated with the security may then be determined in accordance with the one or more cost adjustment ratios and the purchase price per share of the security.

CROSS-REFERENCES TO RELATED APPLICATIONS

This application is a Continuation of U.S. Nonprovisonal applicationSer. No. 12/505,418 filed 17 Jul. 2009, now U.S. Pat. No. 9,563,917issued 7 Feb. 2017; which is a Continuation of U.S. application Ser. No.09/844,198, filed 27 Apr. 2001, now U.S. Pat. No. 7,606,753 issued 20Oct. 2009; which claims the benefit of U.S. Provisional Application Ser.No. 60/200,088 filed 27 Apr. 2000; each of which is incorporated hereinby reference in its entirety.

BACKGROUND OF INVENTION

Anyone that prepares their own tax returns can appreciate the difficultyin determining the gain or loss associated with, for a simple example, amutual fund that has accrued reinvested dividends over a period of time.In such a reinvestment situation, each time the mutual fund declares adividend, additional shares in the find are purchased using the dividendamount and these additional shares are added to the investor's holdings.Typically, the price at which the additional shares are purchased usingthe dividends will differ from the purchase price of the originalshares. When the investor later sells his/her holdings, the purchaseprice of different groups of shares held by the investor will thereforetypically be different, as such groups of shares were purchased atdifferent times. In order to properly calculate the gain or lossassociated with the transaction, an investor must typically review allpast statements associated with the mutual fund, associate the originalpurchase price with the originally purchased shares, a second purchaseprice with the shares resulting from the first dividend reinvestment, athird purchase price with the shares resulting from the next dividendreinvestment, and so on. Then, for each group of shares with a givenpurchase price, the investor must calculate the gain/loss for each groupof shares. Thereafter, the individual must aggregate the gain/lossamounts for all such groups to determine the total gain/loss for theinvestment. This is a tedious and time-consuming process that includesmultiple possibilities for accounting errors that can result in anincorrect determination of the gain/loss associated with the investment.Other capital events, such as stock-splits, spin-offs and mergers,present similar difficulties.

It is an object of the present invention to provide a system and methodthat ameliorates the above difficulties by automatically adjusting thecost basis associated with the purchase of an investment so as tocompensate for capital events such as dividend reinvestments,stock-splits, spin-offs, and mergers that occur while such investmentinstruments are held by an individual.

This and other objects of the invention will become apparent from thedescription that follows.

SUMMARY OF THE INVENTION

The present invention is directed to a computer-implemented method andapparatus for determining a cost basis associated with an investment.The investment may be in the form of a security or securities with whichcapital events can be associated. The term “security” is hereinafterused to refer to all investments having capital events, and includeinvestments traded in individual units such as shares as well asinvestments identified based on a face amount, purchase amount, or othermethod for defining the value of the investment. Information identifyingan issuer associated with the security, parameters such as, but notlimited to, a purchase date of the security, a number of shares of thesecurity purchased on the purchase date, and a sale date of the securitymay be entered into a computer system. A purchase price for the securityon the purchase date may be retrieved from a database coupled to thecomputer system or from a user of the computer system. Alternatively, apurchase price for the security corresponding to the amount paid by thepurchaser may be entered. Next, in response to the informationidentifying the issuer, the purchase date and the sale date, a list ofcapital events that occurred in connection with the security between thepurchase date and sale date may be retrieved from the database. The listof capital events includes at least one event selected from the groupconsisting of a distribution reinvestment event, a spin-off event, amerger event, and a split event. The database stores past priceinformation and capital events for a plurality of different ofsecurities associated with different issuers. The plurality of differentsecurities for which information is stored in the database may include,for example, common stocks, mutual funds, options warrants, and closedend bond funds. Shares held adjustment ratios related to one or moreevents may also be retrieved from the database. The term “Shares HeldAdjustment Ratio” is used to refer to an investment quantity factorreflecting a quantitative change in the holding of an investor, and isnot limited to investments traded as shares, but includes allinvestments having some measure of quantity. Each of the shares heldadjustment ratios may correspond to a capital event that occurred inconnection with a security between the purchase date and the sale date.A current cost basis associated with the security may then bedetermined.

In a preferred embodiment, a current cost basis associated with asecurity is determined initially by applying a first shares heldadjustment ratio associated with an event to the purchase price pershare of the security. If multiple shares held adjustment ratios wereretrieved from the database, then intermediate cost bases may bedetermined by iteratively and cumulatively applying factors associatedwith capital events to the basis of the investment until a final basisis determined. In this preferred embodiment, the cost adjustmentinformation associated with each event retrieved from the database hasan event date associated therewith and is applied to the current costbasis in a chronological order such that the cost adjustment informationassociated with the latest capital event date is applied in the finaliteration of the process.

In accordance with a further aspect, the shares held basis adjustmentratio associated with each stock-split event stored in the databasecorresponds to a number of additional shares of a given security issuedfor each share of the given security held prior to such stock-splitevent; the shares held adjustment ratio associated with each mergerevent stored in the database corresponds to a number of shares of asecurity associated with a merged entity issued for each shareassociated with an issuer that merged into the merged entity; and theshares held basis adjustment ratio associated with each spin-off eventstored in the database corresponds to a number of shares of a securityassociated with a spun-off entity issued for each share associated withan issuer that divested the spun-off entity.

In accordance with a still further aspect, the database stores thecapital events for the plurality of different securities in a firsttable. For each capital event stored in the first table, the databasemay include fields corresponding to the stock symbol of the companyassociated with such capital event, a date of such capital event, a typeof such capital event, a shares held adjustment ratio associated withsuch capital event, and where applicable, the company's role in suchcapital event, the company's partner in such capital event and thesubscription rate in such capital event.

In addition, for each company or security that contains a capital eventstored in the first table, the database may include a second table thatcontains fields for the name of the company, a stock symbol associatedwith the company, a CUSIP number associated with the company, a beginand end date for when such company first and last traded in the marketand a field that stores a value correlating the stock symbol associatedwith such company. The value correlating the stock symbol, company nameand CUSIP number may be used to identify an issuer associated with agiven security in the database as such company undergoes merger events,spinoff events and name change events.

In accordance with a still further aspect, the database may store priceinformation for each of the plurality of securities in a third table.For each date for which price information is stored in the third table,the database may store a company identifier, a high price, a low price,an open price and a close price for each of the plurality of securitiesreferenced in the database.

In accordance with a still further aspect, the database stores acomplete list of all the companies of securities that once traded oilany of the exchanges and have later filed for bankruptcy and/or havebeen delisted from the exchange from which it traded. The capital eventsin connection with each of the defunct companies will also be stored inthe database. The computer system will trace the history (if any) ofcapital events of any given defunct company and provide the necessaryinformation so that the investor has the information needed to determinethe worthlessness of the security.

In accordance with a still further aspect, the database may store a listof the high/low closing and opening prices of all equity and indexoptions that once traded on an exchange. If the investor is not aware ofthe exact date of when an option was either purchased or sold, thesystem may search for an average. The cost basis of an option inconnection with/without its underlining security may be determined basedon whether the option was exercised, expired, or the position was closedin the market. If a purchased call or put were sold on the exchangeprior to expiration, the system could automatically determine thedifference between the cost and the amount received as either along-term or short-term capital gain or loss, depending on the holdingperiod.

In accordance with a still further aspect, the database may store a listof rights or warrants of underlying securities on exchanges. If aninvestor is not aware of an exercise price, cost basis or issue date ofa warrant/rights offering, the system may search the database for theinformation requested by the user. In retrieving the adjusted cost basisof a stock and stock rights, the system may automatically determinewhether the stock rights were taxable or nontaxable.

BRIEF DESCRIPTION OF THE DRAWINGS

A more complete understanding of the present invention may be derived byreferring to the detailed description and claims when considered inconnection with the following illustrative figures. In the followingfigures, like reference numbers refer to similar elements and stepsthroughout the figures.

FIG. 1 depicts a graphical user interface for inputting information suchas an issuer associated with a given security, a purchase date of thesecurity, a number of shares of the security purchased on the purchasedate, and a sale date of the security into a computer system, inaccordance with a preferred embodiment of the present invention.

FIG. 2 depicts an exemplary portion of a database table for storingprice information for each of a plurality of different securities over agiven period of time.

FIG. 3 depicts an exemplary portion of a database table for storinginformation identifying capital events that have occurred over a givenperiod of time in connection with various securities such as thoselisted in the database table of FIG. 2.

FIG. 4 depicts an exemplary portion of a database table for storingassociation information identifying securities.

FIGS. 5A and 5B is a flow diagram showing the overall operation of asoftware system for determining a cost basis associated with a security,in accordance with a preferred embodiment of the present invention.

FIG. 6 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a stock spin-off event.

FIG. 7 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a stock split event.

FIG. 8 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a distribution reinvestment event.

FIG. 9 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a merger event.

FIG. 10 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a delisting event.

FIG. 11 is a flow diagram showing a system for adjusting the cost basisof a security that has undergone a worthless security event.

FIG. 12 is a flow diagram showing a system for adjusting the cost basisof an option security.

FIG. 13 depicts a graphical user interface for outputting the adjustedcost basis associated with a given security in response to theinformation inputted into the system via the graphical user interfaceshown in FIG. 1, in accordance with a preferred embodiment of thepresent invention.

FIG. 14 is a block diagram showing the components of a system fordetermining a cost basis associated with a security, in accordance witha preferred embodiment of the present invention.

DETAILED DESCRIPTION OF EXEMPLARY EMBODIMENTS

The present invention functions to ascertain the historical cost basisof investments, including but not limited to stocks, bonds and mutualfunds, and can be implemented remotely through, for example, theInternet or on a stand alone computer. By way of an overview, in thepreferred embodiment, the present invention determines an accurate costbasis for a given investment regardless of the investment's history ofcapital changes such as stock splits, spinoffs, mergers, rightofferings, original discount values, special dividends and distributionreinvestment options. The present invention calculates and displays thecost basis of a stock, a stock option, mutual fund or any otherinvestment through an easy to use graphical user interface. Theinvention incorporates a database that accesses historical informationfor various securities including daily opening, high, low and closingprices, spin-offs, mergers, stock splits, rights offerings, rightredemptions, special dividends, return capital, original issuediscounts, and dividend reinvestment programs in multiple buyingperiods.

In a preferred embodiment, after being provided with a company symbol orCUSIP number associated with a given investment (if not known, adirectory of companies and their corresponding symbols are preferablyautomatically provided), the date of purchase or acquisition (if theprecise date is not known, an average price for any given month or yearcan be provided), and the original number of shares purchased oracquired (such information is preferably entered using the screen shownin FIG. 1), the present invention automatically determines an adjustedcost basis per share and this information, together with an adjustednumber of shares are provided to the user via a separate screen such asthat shown in FIG. 13. Alternatively, a purchase price for a securitymay be provided by a user, especially where the purchase price of thesecurity may vary through a purchase date. In order to determine thegain/loss associated with the transaction, the user can simply subtractthe sale price of the shares associated with the investment (common toall shares sold) from the adjusted cost basis output of the presentinvention (this figure is also common to all shares associated with thetransaction) to determine the gain/loss. On the cost basis screen shownin FIG. 1, the closing price on the date of purchase is made availableto the user as a beginning reference point if needed, i.e., if the userdoes not have such information, the information may be automaticallyretrieved from a database, such as that shown in FIG. 2.

The present invention thus uses the information provided/retrieved inconnection with the screen shown in FIG. 1 to automatically retrievehistorical information associated with the security. The system may thenlocate the closing price on the purchase or acquisition data of theinvestment and compile forward any and all relative capital changes thatwould affect the basis of the investment. The system may distinguishamong various types of capital changes and apply the correct adjustmentsto the investment's cost basis and number of shares accordingly.

Referring now to FIG. 2, there is shown an exemplary portion of adatabase table 200 for storing price information for each of a pluralityof different securities over a given period of time in accordance with apreferred embodiment of the present invention. Database table 200 storeshistorical price information for each of a plurality of securities. Foreach date 202 covered by the database table 200, the database may storea high price 206, a low price 208, an open price 210 and a close price212 for securities referenced in the database. Securities having asingle price per day, such as mutual funds having a Net Asset Value atclose of trading, may be reported by only the Net Asset Value, or by theNet Asset Value and a Sale Price 214 for the day. It will be understoodby those skilled in the art that other database structures could be usedfor storing the information shown in FIG. 2, and that such modificationsare within the scope of the present invention.

Referring now to FIG. 3, there is shown an exemplary portion of adatabase table 300 for storing information identifying capital eventsthat have occurred over a given period of time in connection with thevarious securities listed in the database table of FIG. 2. Such capitalevents may include, for example, spin-offs, mergers, stock splits,rights offerings, right redemptions, special dividends, return capital,original issue discounts and dividend reinvestments. Database table 300thus stores the capital events for the plurality of different securitiesin database table 200. For each capital event stored in the databasetable 300, the database includes fields corresponding to a name of acompany 302 associated with such capital event, a stock symbol 304associated with such capital event, a date 306 of such capital event, atype (e.g., dividend reinvestment, stock split, spin-off, etc.) of suchcapital event 308, a shares held adjustment ratio 310 associated withsuch capital event, and any other information desired to be associatedwith the capital event. Where a capital event involves multiple relatedshares, additional ratios 312 and related shares values 314 can beincluded.

Referring now to FIG. 4, there is shown an exemplary portion of adatabase table 400 for associating investment names. The table maycontain fields identifying the name of an investment 402, a symbol 404associated with the investment 402, a CUSIP number 406 associated withthe investment 402, a begin date 408 and an end date 410 for when suchcompany first and last traded, and a field that stores a valuecorrelating an investment when said investment is associated withmultiple issuers, symbols, or CUSIP numbers.

In the preferred embodiment, database tables 200, 300, and 400 storepast price information and capital events for a plurality of differentsecurities associated with different issuers. The plurality of differentsecurities for which such information is stored in the databaseincludes, for example, common stocks, mutual funds, closed end bondfunds, and options.

The shares held adjustment ratio stored in the database for a givencapital event reflects the type of the capital event and the financialparticulars associated with the given capital event. The followingexamples demonstrate how the cost basis is determined for some of thedifferent capital events that are processed by the present invention:

Example 1 Spin-Off Event

The ABC company has outstanding Common Stock. On Jun. 30, 1999, the ABCCompany spins off a subsidiary named the XYZ Company for a 2-to-1 ratio.As a result of this spin-off event, for every 1 share of ABC CommonStock held by an investor, the investor will receive 2 shares of the newXYZ Company. Thus, an investor that holds 100 shares of the ABC Companyprior to the spin-off will receive 200 shares of the XYZ Company and,following the spin-off, the investor will hold his original 100 sharesof ABC Common Stock and 200 shares of the XYZ Company. The shares heldadjustment ratio stored in the database for this capital eventcorresponds to the number of shares of the spun-off entity (e.g. the XYZCompany) issued for each share associated with the company that divestedthe spun-off entity (e.g., the ABC Company). In this example, the sharesheld adjustment ratio stored in the database for the capital event wouldtherefore equal 2.0, while the records associated with the original ABCCommon Stock would also reflect a name association with the new XYZCommon Stock.

For example, if an investor had purchased 100 shares of ABC companystock on Jan. 1, 1999 for $10 per share, and the values of ABC and XYZstock were $5.00 and $2.50 per share respectively. The total basis($1000) associated with the shares purchased on Jan. 1, 1999, would haveto be distributed between the new ABC and XYZ shares, dependant on therelative values of the shares at the time of the spin-off. The weightedvalues of the shares at the time of distribution, along with thedistribution ratios, would yield the cost basis allocation associatedboth with the original shares of ABC and for the new shares of XYZ.

A basis allocation ratio associated with the original shares could becalculated by dividing the value per share of the ABC shares at the timeof the spin-off divided by the sum of the values associated with eachshare resulting from the spin-off. For example, as obtained fromreference to a database, the prices for the ABC and XYZ shares, referredto hereafter as pABC and pXYZ respectively, could be $5.00 and $2.50. Assuch, the allocation ratio for the ABC stock utilizing the shares heldratios (nABC and nXYZ) in conjunction with the price information can bewritten as:

${AR}_{ABS} = \frac{pABC}{( {{nABC} \star {pABC}} ) + ( {{nXYZ} \star {pXYZ}} )}$

Substituting the known values for the example yields an allocation ratioof 0.50. Applying this ratio to the basis per share of the originallyheld ABC common stocks would yield a basis per share of $5.00. Anallocation ratio for the new XYZ common stock could be similarlydetermined, with an allocation ratio of 0.25 being determined. Applyingthe allocation ratio to the basis per share of the original ABC commonstock would yield a basis per share of $2.50 per share of XYZ commonstock.

Example 2 Stock-Split Event

The ABC company has outstanding common stock. On Jun. 30, 1999, the ABCCompany splits its shares in a 3-for-1 stock-split. As a result of thisstock-split, for every 1 share of ABC common stock held by an investorprior to the stock split, the investor will receive an additional 2shares of common stock of the ABC Company. Thus, an investor that holds100 shares of the ABC Company prior to the stock-split will receive 200further shares of the ABC Company as a result of the stock-split.Following the stock-split, the investor will hold his/her original 100shares of ABC Common Stock and 200 further shares of the ABC Company.The shares held adjustment ratio stored in the database for this capitalevent may be determined as follows:

SHAR=(number of shares issued per share)+1.0

In this example, the shares held adjustment ratio stored in the databasefor this capital event would therefore equal 3.0. A basis allocationratio would simply be 1/(nABC) or 0.333. Applying this allocation ratioto the prior basis per share would thus distribute one-third of theprior basis per share to each share held after the split.

Example 3 Merger Event

The ABC company has outstanding Common Stock. On Jul. 30, 1999, the ABCCompany merges with the XYZ Company on a 2 for 1 ratio. As a result ofthis merger, for every 2 shares of ABC Common Stock held by an investorprior to the merger, the investor exchanges such shares for 1 share ofCommon Stock of the merged ABC/XYZ Company. Thus, an investor that holds200 shares of the ABC Company prior to the merger will exchange suchshares for 100 shares of the merged ABC/XYZ Company and, following themerger, the investor will hold only 100 shares of the merged ABC/XYZCompany (and none of his/her original 200 shares of ABC Common Stock).The shares held adjustment ratio stored in the database for this capitalevents a number of shares of a security associated with the mergedentity (e.g., the ABC/XYZ Company) issued for each share associated withan issuer (e.g., the ABC Company) that merged into the merged entity. Inthis example, the shares held adjustment ratio stored in the databasefor this capital event would therefore equal 0.5. An association betweenthe identity of the ABC shares held before the merger with the XYZshares post merger would also be created.

Example 4 Distribution Reinvestment Event

A distribution of dividends or capital gains allocations from a stock ormutual fund may result in the acquisition of additional shares of thestock or mutual fund through a distribution reinvestment. Thedistribution is generally taxable at the time it issues (unless held aspart of a deferred income plan such as an IRA), and as such can affectthe basis of the underlying investment from which the distribution wasissued.

For example, an investor may have purchased 100 shares of XYZ stock at$10 per share on Jan. 1, 1999. On Dec. 28, 1999, the XYZ company mayhave issued a dividend of $0.50 per share, which the investor may haveelected to have reinvested. The cash value of the distribution to theinvestor would have been $50. If the per share price of the investmenton Dec. 28, 1999 was $12.50 per share, the reinvestment would haveresulted in the purchase of an additional 4 shares of XYZ. As such, ashares held adjustment ratio of 1.04 would be stored, determined bydividing the distribution per share by the price per share at the timeof the distribution, and adding one (representing each originally heldshare) to arrive at a shares held adjustment ratio.

Alternatively, a shares held adjustment ratio could be determinedwithout directly retrieving a SHAR value from the database. Since theSHAR value can be readily determined from the distribution amount andpurchase price on the day of the distribution. SHAR can be calculatedas:

SHAR+(DIST)/(PricePerShare)

The timing of the sale of the shares of the XYZ company may impact thetax consequences of a sale of the shares. As such, the purchase date ofeach group of shares may need to be remembered for reporting purposes ata later date. Accordingly, the basis of the shares can be tracked pergroup or aggregated.

If the basis is to be tracked for each group of XYZ stock based on itspurchase date, a distribution reinvestment event would cause a sharesheld adjustment ratio of 1.0 to be applied to the quantity of the sharesheld immediately prior to the distribution event, as well as thecreation of a new group of shares (purchased on the date of thedistribution event), where the basis for the new group would bedetermined by the purchase price of the shares. As such, no allocationratio would need to be applied to either group of shares, as the basisfor the originally held shares would not change, while the basis for thenewly acquired shares would be the price of the shares at the time ofthe reinvestment.

Alternately, where distributions of more than one type occur on the sameday, a distribution reinvestment event could include a dividenddistribution as well as a capital gain distribution. It will beunderstood by those skilled in the art that such a distribution could betreated as a single distribution event, or as multiple distributionevents based on the type of distribution which has occurred.

Example 5 Worthless Security Event

For this example, assurance the ABC Company was delisted from the NewYork Stock Exchange in 1997, and afterwards filed for bankruptcy twoyears later. The investor who purchased the now defunct company stockbefore 1997 may not be aware of this recent development. In order forthe investor to write off the investment in the year the company filedfor bankruptcy (an IRS requirement to approve the write-off), proof ofthe investment's worthlessness is necessary. The investor may use thedatabase by either entering the company's name, stock symbol or CUSIPnumber and the software may search the database to identify the capitalchange history of the defunct company. If the investment is worthless invalue, the system will identify it and a pop-up window will appear andprovide the user with important information needed to write-off theinvestment. The pop-up window can identify when the security wasdelisted from the exchange it traded on and (if) when the company wentbankrupt or was liquidated.

A simple delisting of an investment generally means that the marketprice of an investment has dropped below a value criteria established byan exchange. The investment does not necessarily lose value, nor is thebasis or number of shares held adjusted by the event. As such, adelisting event may have a shares held adjustment rate of 1 associatedwith the event.

A liquidation type bankruptcy may result in the value of investmentsbecoming zero. This is particularly the case with equity investments,such as common stocks. The basis in the shares does not change, nor doesthe number of shares held. As such, the shares held adjustment ratioassociated with such an event would be 1. This is a worthless securityevent.

Other forms of bankruptcy may also occur, such that the event associatedwith the bankruptcy may be comparable in form to a merger or splitevent. Such a situation arises where originally held investments areconverted to a newly issued investment at a discounted rate. Such anevent may occur as part of a reorganization bankruptcy. For example, asa means for gaining shareholder approval for a reorganization plan, theshareholders may be offered a fractional amount of stocks in areorganized company in exchange for ratification of the reorganizationplan. The basis of the originally held shares may either be fullyassociated with the new shares, or may be separated as a capital lossassociated with the event.

Example 6 Put Options

On Apr. 11, 2000, an investor sold an ABC May put options at a strikeprice of $50 per share for a premium of $2.00 per share.

In May, the ABC put options were exercised due to the underlying stockreaching $50 or higher. The investor retains the premium, however, mustpurchase the underlying ABC stock at the strike price.

The investor may use the application and database to determine theaccurate cost basis for her ABC stock. The system will automaticallydeduct the amount of the premium received by the investor from thesecurity's purchase price. The adjusted cost basis for the ABC stock isthen determined to be $48 per share.

The system will also automatically determine an accurate cost basis forthe other side of the transaction as well. For example, the investor whobrought the ABC put options at the strike price of $50 per share for$2.00 can also retrieve an adjusted cost basis using the databasesystem. The application can determine the amount realized on the sale ofthe ABC stock by deducting the premium paid when the option wasexercised. The system will then determine that the adjusted cost basisfor the ABC stock is also $48 per share.

Example 7

Options (Calls/Puts) with Stock

On Jan. 1, 2001, an investor purchased 200 shares of XYZ Company commonstock at a price of $25 per share for a total cost of $5,000. Theinvestor also sold an XYZ February covered call option at a strike priceof $35 per share for a premium of $1.50 per share. The investor receiveda premium total of $300 for the covered call option sold.

In February, the XYZ covered call options were exercised when theunderlying XYZ stock reached $35 or higher. The investor retained thepremium of $300, however, must sell the XYZ stock at a price of $35 pershare.

The investor may use the application and database to determine theaccurate cost basis for his XYZ stock coupled with the covered calloption as a combined investment strategy. The system will automaticallyapply the premium received by the investor and add that amount tohis/her original cost basis of $5,000. The adjusted cost basis for XYZis then determined to be $5,300 or $26.50 per share.

The system will also automatically determine an accurate cost basis forthe other side of the transaction as well. For example, the investor whobrought the 200 shares of the XYZ stock at the strike price of $35 pershare can also retrieve an adjusted cost basis using the databasesystem. The application can retrieve an accurate cost basis by applyingthe premium paid for the call option of $300 to the amount paid for theXYZ stock of $5,000. The system will then determine that the adjustedcost basis for the XYZ stock is also $5,300 or $26.50 per share.

Returning now to FIG. 4, for each capital event stored in table 400, thedatabase further preferably includes a field that stores a valuecorrelating the stock symbol and the CUSIP number associated with suchcapital event. The value correlating the stock symbol and the CUSIPnumber uniquely identifies an issuer associated with a given security inthe database as such issuer undergoes historical capital changes such asmerger events, spin-off events and name change events. The valuecorrelating the stock symbol and the CUSIP number acts as a safeguard inthe event the stock symbol and/or CUSIP no longer applies as a result ofa historical capital change, and is particularly useful for trackingstocks that have undergone capital events such as name changes, mergers,obsolete securities (where an old ticker symbol previously associatedwith a given stock has been reassigned and/or where the CUSIP numberpreviously associated with a given stock becomes obsolete), and when thesecurity changes the exchange which it trades on (for example, from theNASDAQ to the NYSE).

An example of a name change occurred when International Harvesterchanged its name to Navistar. In this case, the stock symbol for thesecurity changed. An example of a merger occurred when Travelers mergedwith Citicorp to form Citigroup. In this case, both the Citicorp andTravelers stock symbols were reassigned and Citigroup was assigned theold stock symbol for Chrysler (which was merged into Daimler Benz andhence ceased to exist under the name Chrysler.) The CUSIP numbers forthese entities also changed as a result of these capital events. In thecase of obsolete securities, the company symbols and CUSIP numbers areno longer used once the stock is delisted. Finally, when a securitychanges the exchange on which it trades, the company is assigned a newstock symbol and the old stock symbol previously used by the company iseither no longer used or reassigned.

Accordingly, in the present invention, a value correlating the stocksymbol and the CUSIP number (e.g., a 10 digit alpha numeric internalidentification number) is preferably permanently assigned to everysecurity referenced in the database. This internal identificationfollows the security through time in the database, where other trackingmethods such as CUSIP's and stock symbols fail.

Referring now to FIGS. 5A and 5B, there is a flow diagram showing theoverall operation of a software system 500 for determining a cost basisassociated with a plurality of shares of a security, in accordance witha preferred embodiment of the present invention. In step 502,information identifying an issuer associated with the security, apurchase date of the security, a number of shares of the securitypurchased on the purchase date, and a sale date of the security isentered using, for example, the interface shown in FIG. 1. In step 502,a purchase price per share of the security on the purchase date is alsoeither retrieved from database table 200 or from the user if the userhas such information available. Next, in step 504, in response to theinformation identifying the issuer, the purchase date and the sale date(input in step 502), a list of capital events that occurred inconnection with the security between the purchase date and sale date isretrieved from database table 300. One or more shares held adjustmentratios are also retrieved from the database in step 504. Each of theshares held adjustment ratios corresponds to one of the capital eventsthat occurred in connection with the security between the purchase dateand the sale date. In steps 506-520, a current cost basis associatedwith the security may then be determined in accordance with the one ormore shares held adjustment ratios and the purchase price per share ofthe security.

In a preferred embodiment, a current cost basis associated with thesecurity is preferably determined (in steps 506-520) initially byapplying a first shares held adjustment ratio to the purchase of thesecurity. If multiple shares held basis adjustment ratios were retrievedfrom the database in step 504, then an intermediate cost basis may beassigned to be equal to the current cost basis. For each further sharesheld adjustment ratio retrieved from the database in step 504, thecurrent cost basis is then adjusted again by applying a further sharesheld adjustment ratio to the intermediate cost basis. This process isthen repeated until each further shares held adjustment ratio retrievedfrom the database has been used to adjust the current cost basis. Inthis preferred embodiment, each further shares held cost adjustmentratio retrieved from the database has an event date associated therewithand is applied to the current cost basis in a chronological order suchthat the cost adjustment ratio associated with a latest event date isapplied in the final iteration of the process.

Although the above contemplates retrieving all capital events beforeapplying them to the basis of a security, the capital events can beretrieved and applied sequentially for each capital event stored. Thecapital events should be applied chronologically to accommodateaccounting and tax reporting requirements.

Thus, for example, if for a given investment four capital eventsoccurred between a purchase date of Jan. 1, 1999 and a sale date of Dec.31, 1999, i.e., a reinvested dividend on Jan. 13, 1999, a merger on Feb.28, 1999, a stock-split on Mar. 31, 1999 and a spin-off on Apr. 30,1999, then in step 504, a list of four capital events would be retrievedfrom database table 300. In addition, four shares held adjustment ratios(each corresponding to one of the four capital events) would also beretrieved from the database. In the steps that follow, the current costbasis associated with the security would then be determined inaccordance with the four shares held adjustment ratios and the purchaseprice per share of the security. In particular, in this example, thecurrent cost basis associated with the security would initially beadjusted (in step 520 which is used for processing dividendreinvestments) by applying the first shares held adjustment ratioassociated with the first capital event to the purchase price per shareof the security. Next, since multiple shares held basis adjustmentratios were retrieved from the database in step 504, an intermediatecost basis is assigned to be equal to the current cost basis.Thereafter, the current cost basis is adjusted again (this time in step524 which is used for processing mergers) by applying the second sharesheld adjustment ratio associated with the second capital event to theintermediate cost basis. This process is then repeated until eachfurther cost basis adjustment ratio retrieved from the database has beenused to adjust the current cost basis. Accordingly, in the givenexample, the intermediate cost basis is reassigned to be equal to thecurrent cost basis (as adjusted using the second shares held adjustmentratio), and the current cost basis is adjusted again (this time in step516 which is used for processing stock splits) by applying the thirdshares held basis adjustment ratio associated with the third capitalevent to the intermediate cost basis. Finally, in the given example, theintermediate cost basis is reassigned yet again to be equal to thecurrent cost basis (as adjusted using the third shares held adjustmentratio), and the current cost basis is adjusted again (this time in step512 which is used for processing spin-offs) by applying the fourthshares held adjustment ratio associated with the fourth capital event tothe intermediate cost basis. The current cost basis as adjusted usingthe fourth shares held adjustment ratio is then preferably output to auser via the screen shown in FIG. 10.

Referring now to FIG. 6, there is shown a flow diagram showing a systemfor adjusting the cost basis of a security that has undergone a stockspin-off event, in accordance with the present invention. FIG. 6 will bedescribed using the following example: Company A spins off Companies Band C, and prior to the spin off, the investor's average cost basis foreach share Common Stock of Company A was $5/share. For the new companies(i.e., Companies B and C), the day of the spin-off is deemed to be theday that the new company first traded separately. The average prices, atthe time of the spin-off, are: Price for Company A Stock=pA=$4/share;Price for Company B Stock=pB=$3/share; and Price for Company CStock=pC=$2/share.

In step 602, a spin-off event is identified. In Step 604, the processretrieves a first shares held adjustment rate (SHAR.sub.1). In Step 606,the process retrieves an identifier for the related investment (RELSTOCK.sub.1) associated with the first shares held adjustment rate(SHAR.sub.1). The process may then retrieve the prices of the shares onthe spin-off date 608. If it is determined 610 that there are more spunoff companies, the process may continue to retrieve shares heldadjustment ratios and related investments until all spun off companieshave been identified. At this point, the process will have accumulatedall of the spin-off stock information. New shares held information canbe determined 612 by multiplying each shares held adjustment ratio(SHAR.sub.1, SHAR.sub.2, . . . ) by the number of shares held prior tothe spin-off event. Each new group of spin-off shares (SHAR.sub.1*REL.STOCK1, SHAR2*REL. STOCK2, . . . ) may then be separated for furthertracking. A basis allocation factor for each group may be calculated 614using weighted averages based on the number and values of the sharesinvolved in the spin-off event. The allocation factors may then beapplied 616 to the original basis to determine the basis in each groupof shares.

Where the prices are for a mutual fund with a single price on a givenday, the actual cost basis adjustment ratios for each of the Company A,B, and C investments can be stored. Where high, low, and average pricesare being used to ascertain a strategy with the highest return to aninvestor, the individual prices per share (high, low, and average) mayalternately be stored, with ratios calculated from the individualprices, or three cost basis adjustment ratios may be storedcorresponding to a high strategy, a low strategy, and an averagestrategy.

For the values of Company A, B, and C shares described above, the costbasis adjustment ratio (in a form relating the basis per share after anevent to the basis per share before the event) for the originally heldshares in Company A could be calculated as:

${CABR}_{A} = \frac{{nA} \star {pA}}{( {{nA} \star {pA}} ) + ( {{nB} \star {pB}} ) + ( {{nC} \star {pC}} )}$

where nA, nB, and nC are the number of shares received per share of theinvestment which underwent the spin-off. Using pA=$4, pB=$3, and pC=$2,and assuming that one share of Company B and one share of Company C weredistributed for each ten shares of Company A stock held (i.e., nA=1,nB=0.1, and nC=0.1), the value of CBAR.sub.A would be 0.8888. Applyingthis CBAR to the basis in the originally held shares of company A wouldyield a basis of $4.444 per share. By substituting pB, and pC into thenumerator, cost basis adjustment ratios could likewise be determined fora basis in the newly held shares of Company B and C. Using the abovevalues for pB and pC, CBAR.sub.B would be 0.0667, and CBAR.sub.0 wouldbe 0.0444. The basis for the newly held shares of Company B and CompanyC would be determined by applying the relevant CBARs to the original pershare basis of Company A stock held.

Referring now to FIG. 7, there is shown a flow diagram showing a systemfor adjusting the cost basis of a security that has undergone a stocksplit event, in accordance with the present invention. In step 702, asplit event is identified. In step 704, a shares held adjustment ratio(SHAR.sub.1) associated with the stock-split event is retrieved fromdatabase table 300. The number of shares held by the investor is thenadjusted 706 based on the shares held adjustment ratio value. Thus, forexample, if Company X had a 3-for-1 stock split, and an investor held100 Shares of Company X prior to the stock split, the number of sharesheld by the investor would be adjusted by multiplying the previousshares held by the investor by the shares held adjustment ratio. In theexample, the above shares held adjustment ratio would be 3 and theadjusted number of shares would therefore be equal to 300. In step 708,the cost basis of the investment per share is similarly adjusted bydividing the investor's average cost basis for each share Stock ofCompany X prior to the split by an allocation ratio as discussed above.In assessing the effect of the next subsequent capital event on the costbasis of the shares of Company X, the present invention will use theadjusted cost basis yielded by this step 708 as a new starting point andthen adjust this value to reflect the effect of such further capitalevent.

Referring now to FIG. 8, there is shown a flow diagram showing a systemfor adjusting the cost basis of a security that has undergone adistribution reinvestment event. FIG. 8 will be described using thefollowing example: An investor owns 100 shares of Company Y stock, andprior to the dividend event, the investor's cost basis for each sharewas $5 per share. The investor's total basis for the 100 shares wouldtherefore be $500. On Sep. 1, 2000, Company Y declared a dividend of$0.25 per share through a reinvestment plan, wherein the price per shareof the Company Y stock at the time of the reinvestment was $10 pershare. In connection with this example, a shares held adjustment ratioof 1.025 would be stored.

In step 802, the system retrieves the shares held adjustment ratio forthe distribution event (which may be retrieved from Table 300), and, instep 804, the system retrieves from the database table 200 thereinvestment price of the stock (e.g., the Company Y shares, noted asrpY). From the shares held adjustment ratio (nY) and the reinvestmentprice (rpY), (which may be retrieved from table 200) the distributionper share (d/s) of the Company Y stocks may be determined:

d/s(nY−1)*rpY

Alternately, the distribution per share value can be stored in table300. In step 806, the number of newly acquired shares may be determinedby applying the shares held adjustment ration minus one to the originalnumber of shares held, or:

NewShares=(nY−1)*OriginalShares

In step 808, the new adjusted cost basis (NACB) per share may bedetermined by:

${NACB} = \frac{( {{d\text{/}s} + {b\text{/}s}} )}{nY}$

Alternately, the new shares can be grouped 808 for further tracking,with the basis of the original shares unchanged, and set 810 the basisof the new shares equal to the purchase price of the new shares. In thissituation, an average basis/share can be determined by summing the totalbasis associated with each group of shares, and dividing by the totalnumber of shares. For the described example, the basis per share beforethe event plus the distribution per share would be $5.25, which whendivided by the shares held adjustment ration (nY) would yield a $5.048basis per share. The process must track the number of new shares, or thenumber of original shares and the group of new shares, throughsubsequent events.

Referring now to FIG. 9, there is shown a flow diagram showing a systemfor adjusting the cost basis of a security that has undergone a mergerevent, in accordance with the present invention. FIG. 9 will bedescribed using the following example: An investor owned 100 sharesCompany ABC, and prior to the merger event, the investor's average costbasis for each share Company A Stock was $5/share. Company ABC thenmerged into Company XYZ and every share of Company ABC stock was swappedfor 2 shares of Company XYZ stock. The shares held adjustment ratiostored in the database 300 for this capital event would therefore equal0.5. In step 906, a new number of shares (of Company B Stock) isdetermined by applying the shares held adjustment ratio (retrieved 902from database 300) to the previous number of shares held by theinvestor.

In step 908, a new average cost basis per share may be determined byapplying the reciprocal of the shares held adjustment ratio to theprevious average cost basis per share of the investment ($5/share).Thus, the new average cost basis per share is:

New cost basis/share=$5/share*(½)=$2.5 per share

In assessing the effect of the next subsequent capital event on the costbasis of the shares of Company XYZ, the present invention will use theadjusted cost basis yielded by this step 908 as an intermediate valueand then adjust this value to reflect the subsequent capital events.Since the company identifier will no longer exist after the merger, thesystem will track the basis of the shares by applying events associatedwith the newly held security.

Referring now to FIG. 10, there is shown a process for resolving adelisting event. Delisting events may be stored in Table 300. Once adelisting event has been noted 1002, the process may search forward 1004to determine 1006 if the investment has been relisted. If it isdetermined 1006 that the investment has been relisted, the process mayreturn to processing capital events. If it is determined 1006 that theinvestment has not been relisted, the process notifies 1008 the user ofthe delisting event, and the basis of the investment at the delistingdate.

Referring now to FIG. 11, there is shown a process for resolving aworthless security event. Once a worthless security event has beenidentified 1102, the process may determine 1104 whether shares in areformed company were exchanged for the worthless shares. If no shareswere exchanged, the user may be informed 1106 of the worthless shareevent, the basis of the time of the event, and the date on which itoccurred such that an investor can properly record a capital lossassociated with the event.

If new shares were exchanged, a shares held adjustment ratio (SHARex)can be retrieved 1108, and a new shares held value may be determined1110. The basis of the new shares held may be determined 1112 from thevalue of the shares on the exchange date. The new shares may then beassociated 1114 with the basis calculation. A capital loss associatedwith the event can be determined 1116, and reported 1106 to the user.

Now referring to FIG. 12, there is shown a process for handling optioninvestments. In accordance with a still further aspect, the database maystore a list of all high/low closing and opening prices of equity andindex options traded on an exchange. An option is an instrument givingthe holder the right to buy or sell an investment at a predeterminedprice. Accordingly, the instrument itself may be valued and traded on anexchange, as well as exercised. Such options may be characterized by thecontracted investment price, as well as an expiration date after whichthe option cannot be exercised.

If an investor is not aware of the exact date on which an option waseither purchased or sold, the system may search for average values.

The cost basis of an option is determined by its purchase price. Theoption may have a sale value associated, such that sale of the option oroptions results in a capital gain or loss, based on the sale price andbasis in the held shares.

An option traded without being exercised may be treated similarly toother investment vehicles. The sale price minus the basis provides thedetermination of capital gain or loss. If the option expires, the optionmay become valueless, similar to a worthless stock event.

If the option is exercised, the effect is similar to a merger, in thatthe original option ceases to exist, but is replaced by the investmentto which the option pertained. The execution of the option requires thepurchase of the investment, albeit at the contract price. Once it hasbeen identified (shown in FIG. 5B) that option shares are involved, theuser can be queried 1202 to determine whether the option shares wereexecuted, and if executed, queried 1204 for a date on which the optionswere exercised. If it is determined 1202 that the options were executedthe basis of shares acquired by exercising the options can be determined1206 by adding the purchase price of the shares to the basis of theoptions to determine the basis of the new shares. These new shares canthen be associated 1208 with the basis tracking event, and the basis ofthe new shares tracked 1210. For the purposes of this discussion, it isassumed that the options cease to exist when exercised, such that thenew shares would be tracked forwards.

If it is determined that the options were not exercised, the optionswould expire. Expiration of the options results in the options becomingworthless. In this event, the process user may be notified 1212 of theexpiration date for the options, and if it is determined 1214 that theoptions have expired, notified 1216 of the basis of the options at thetime of expiration, and the need to report the associated capital loss.Since no shares of a new investment were acquired, the process can endor return 1210. Returning 1210 would result in the same outcome, sinceno further capital events would exist for the expired options.

Where an investment has underlying rights or warrants, a capital eventcan occur when an investor exercises rights on warrants, eitherconverting a presently held investment or exercising a right to purchaseadditional or different shares. These rights can either be associatedwith an investment when purchased or issued by a share issuer while heldby an investor.

If stock rights were issued while held by an investor and were taxable,the system may determine the basis of the rights as the fair marketvalue at the time of the distribution, and the basis of the underlyingstock may remain the same. If the stock rights were nontaxable, thesystem could determine if the fair market value of the rights were moreor less than 15% of the fair market value of the underlying stock. Ifthe stock rights had a fair market value of 15% or more of the fairmarket value of the underlying stock, the system could then divide theadjusted basis of the underlying stock between the underlying investmentand the investment rights. A verified ratio can be determined based onthe fair market value of each of the underlying investments and theinvestment rights to the fair market value of both at the time ofissuance of the rights or warrants.

If fair market value of the stock rights was less than 15%, the systemwill provide the user with both cost basis methods by determining thebasis as zero or by dividing the basis of the underlining stock betweenthe underlining stock and stock rights. If the stock rights wereexercised, the system will determine the basis of the newly acquiredstock. If the rights were sold on the exchange, the system willdetermine its basis as well. The holding period of that underling stockor of the original rights or warrants will also be calculated anddisplayed in the detail screen for tax purposes.

For example, suppose an investor owned 100 shares of ABC Company stock,which cost $22 per share. The ABC Company issued 10 nontaxable stockrights (0.1 stock right per share) that would allow the investor to buy10 more shares at $26 per share. At the time the stock rights wereissued, the stock had a market value of $30, not including the stockrights. Each stock right had a market value of $3. The market value ofthe stock rights was thus less than 15% of the market value of the stockand the investor could choose to divide the basis of the stock betweenthe stock and the stock rights. The basis for the underlying stock andthe stock rights would be as follows:

100 shares.times.$55=$5,500, basis of underling stock

100 shares.times.$70=$7,000, market value of underlining stock

10 stock rights.times.$7=$70, market value of stock rights

($7,000/$7,070).times.$5,500=$5,445.54, new basis of underlining stock

($70/$7,070).times.$5,500=$54.46

Table 400 could also be used to store a list of convertible securities.The cost basis and holding period of convertible securities can becalculated the same way as other securities, from the day after thepurchase trade date if the security is not converted. If a convertiblebond is purchased and later converted into another security, the systemmay adjust the cost basis and holding period of the new securitydepending upon whether or not money was paid to affect the conversion.

If capital is not needed to affect the conversion, the system mayautomatically adjust the cost basis and the holding period of the newsecurity to begin on the day after the original convertible security waspurchased. If capital were paid to affect the change, the system couldadjust the cost basis and holding period for the portion of the newlyacquired security attributable to the additional payment that began onthe day after the payment. For the portion not attributable to theadditional payment, the cost basis and holding period would begin on theday after the trade date on which the original convertible security waspurchased.

If the investor is not aware of the cost basis or acquisition date ofthe convertible security, the system could search the database for theinformation requested by the user. The system will automaticallydetermine the adjusted cost basis and holding period for thatconvertible security based on the information provided above. Theholding period of that convertible security will also be calculated anddisplayed in the detail screen for tax purposes.

For example, suppose that in September, an investor bought for $1 aright issued by ABC Corporation entitling the investor, on payment of$99, to subscribe to a bond issued by that corporation.

On October 6, the investor exercised the right and subscribed to thebond, which was issued on October 15. The bond contained a clausestating that the investor would receive one share of ABC Corporationcommon stock on surrender of one bond and payment of $50.

Later, the investor presented the bond and $50 and received one share ofABC Corporation common stock. The investor did not have a recognizedgain or loss. The basis of the investor's share of stock is $150($1+$99+$50). The investor's holding period would be split. Theinvestor's holding period for the part based on his ownership of thebond ($100 basis) would begin on October 6. The investor's holdingperiod for the part based on his cash investment ($50 basis) would beginon the day after he acquired the share of stock. Each portion of thebasis could be tracked through capital events.

Additionally, table 400 may be used to store a list of mutual fundsecurities. If an investor is not aware of the cost basis or purchasedate, the system may search the database for the information requestedby a user. If an investor is not aware of the adjusted cost basis of themutual fund due to a series of dividend reinvestment events and/orvarious purchase periods, the system can use an average basis method.The software can first determine, based on the stock symbol, if themutual fund is equity or fixed income. The system can then ascertain thedifference between ordinary income (which is considered ordinary income)and capital gain distributions. The system can identify bothundistributed and distributed capital gains for reporting purposes. Thesystem may increase the cost basis of the mutual fund shares whenundistributed capital gains are realized. The system further identifiesreturn of capital distributions whereby the cost basis of mutual fundshares is reduced. If the mutual fund shares reached a level of zero,the system may then treat the return of capital distribution as acapital gain. When determining the cost basis of mutual fund shares, thesystem can use two methods, specific share identification and first infirst out (FIFO), provided the investor did not previously use anaverage basis for the sale of shares of the same mutual fund.

If the investor can definitely identify the shares sold, once theinformation is entered, the system will use the adjusted basis of thoseparticular shares to determine capital gain or loss. If the shares wereacquired at different times or at different prices, and the investorcannot identify which shares were sold, the oldest shares stillavailable are considered sold first.

The system may also use an average basis if the investor acquired themutual fund shares at various periods and are left on deposit in anaccount handled by a custodian or agent. The system may further identifybetween two methods, a single category method and a double categorymethod.

In the Single category method, the system may automatically find theaverage cost of all shares owned at the time of each disposition,regardless of how long the investor owned them. The system may thendetermine capital gain or loss based on the holding period. Sharesdisposed of are considered to be those acquired first. The system couldadd the cost of all the shares owned (determined by the offer price) anddivide by the number of shares owned to determine an average basis pershare.

In the Double category method, all shares in an account at the time ofeach disposition are divided into two categories, short-term andlong-term. The system may then identify shares held for one year or lessas short-term. Shares held longer than one year may be identified aslong-term. The process can determine the basis of each share as anaverage basis in that category.

For an average basis example, suppose an investor bought 400 shares inthe ABC Mutual fund: 200 shares on Jun. 5, 1998, and 200 shares on May15, 1999. On Nov. 11, 1999, the investor sold 300 shares. The basis ofall the shares sold would be the same, but the holding period of 200shares would be long-term and the holding period for the 100 shareswould be short-term.

For a single category example, suppose an investor bought the followingshares in the XYZ Mutual fund: 100 shares in 1996 at $10 per share, 100shares in 1997 at $12 per share, and 100 shares in 1998 at $26 pershare. On Apr. 8, 1999, the investor sold 150 shares. The basis of theshares sold would be $2,600 ($16 per share), computed as follows:

Total cost=($1,000+$1,200+$2,600)=$4,800

Average basis per share=($4,800/300)=$16

Basis of shares sold=($16×150)=$2,400

The screen output screen shown in FIG. 13 displays three alternativecost basis methods: cost basis per share based on closing price, averagehigh and low price, and opening price. These alternatives are preferablymade available to accommodate the user's option of selecting the mostfavorable tax treatment as permissible by the Internal Revenue Service.It will be understood by those skilled in the art that these alternativecost basis methods are implemented using similar calculation processes(described below); however, each method may use a different set of priceinformation for making calculations.

As shown in FIG. 14, the present process is preferably embodied in anautomated process, relying on database capabilities to provide therequisite information necessary for the process to be accomplished. Theautomated process may be hosted on one or more servers. Individualcomponents of the system, such as database, may be provided by differententities, with the individual components communicably connected with theInternet.

The above process is illustrated assuming information regarding aninvestment is specifically known. If an investor doesn't know a date ofpurchase, averaged values can be developed for the investor based on apurchased period. Sale dates can also be estimated where investorrecords do not provide the necessary date.

Although the presently preferred interface between the system and a useris a graphical user interface, the present invention may be implementedin a batch process, such that a list of investments and associatedinformation is presented to the system, allowing present basisdeterminations to be made on the list. Alternately, the presentinvention and process may be implemented in spreadsheet fashion, withinformation provided to the system being provided in the form of aspreadsheet, such that revision of the data provided to the system viathe spreadsheet causes the resultant basis determinations to be updatedbased upon the revision.

The previous description of the preferred embodiments is provided toenable any person skilled in the art to make and use the presentinvention. The various modifications to these embodiments will bereadily apparent to those skilled in the art, and the generic principlesdefined herein may be applied to other embodiments without the use ofthe inventive faculty. Thus, the present invention is not intended to belimited to the embodiments shown herein but is to be accorded the widestscope consistent with the principles and novel features disclosedherein.

1. A method for updating a database record comprising a cost basis datumassociated with a first security identifier in the database recordfollowing an identification of a message representative of an occurrenceof a capital event, the method comprising: retrieving, over a network, abeginning cost basis datum associated with the first security identifierfrom a database by a computer or the computer determining a beginningcost basis datum based on a purchase price datum associated with thefirst security identifier and a purchase date associated with thepurchase price datum, wherein the first security identifier isassociated with a purchase event datum including a date prior to theoccurrence of the capital event identified in the message; retrieving,over the network, a first shares held adjustment ratio from the databaseby the computer, wherein the first shares held adjustment ratiocorresponds to the first security identifier and a date datumcorresponding to a first capital event that occurred prior to thecapital event; determining a second cost basis datum by the computer,wherein the first shares held adjustment ratio is processed, via thecomputer, using the beginning cost basis datum; correlating, via thecomputer, the second cost basis datum to the beginning cost basis datumvia referencing a primary key stored in the database, wherein theprimary key is associated with the first security identifier;retrieving, over the network, a second shares held adjustment ratio fromthe database by the computer, wherein the second shares held adjustmentratio, based on the primary key, corresponds to a second securityidentifier and a date datum corresponding to a second capital event thatoccurred after the capital event; determining the third cost basis datumvia the computer, wherein the second shares held adjustment ratio isprocessed, via the computer, using the second cost basis datum, andpresenting a third cost basis datum on a display coupled to thecomputer, after correlating, via the computer, the third cost basisdatum to the beginning cost basis datum and the second cost basis datumvia referencing the primary key stored in the database, wherein theprimary key is associated with the second security identifier, whereinthe first shares held adjustment ratio is associated with a first eventdate datum that is represented to precede a second event date datumassociated with the second shares held adjustment ratio and wherein thefirst shares held adjustment ratio is processed, via the computer, priorto the second shares held adjustment ratio.
 2. The method for updating acost basis according to claim 1, further comprising presenting at leastone of the second cost basis and at least one of the first shares heldadjustment ratio and the second shares held adjustment ratio on thedisplay.
 3. The method for updating a cost basis according to claim 1,further comprising storing the second cost basis on the database.
 4. Themethod for updating a cost basis according to claim 1, furthercomprising calculating at least one of a capital gain and a capital lossfor the security based upon a difference between the second cost basisand the beginning cost basis.
 5. The method for updating a cost basisaccording to claim 1, wherein the beginning cost basis is determined bya purchase price, number of shares purchased, and purchase date for thesecurity.
 6. The method for updating a cost basis according to claim 5,wherein at least one of the first shares held adjustment ratio or thesecond shares held adjustment ratio comprises a factor determinedaccording to a type of capital event altering the number of sharesassociated with the beginning cost basis.
 7. The method for updating acost basis according to claim 1, further comprising assigning aninternal identification value to the security identifier in the databaseto track the security.
 8. The method for updating a cost basis accordingto claim 7, wherein the internal identification value correlates to atleast one of a stock symbol and a Committee on Uniform SecurityIdentification Procedures (CUSIP) number.
 9. A system for determining acost basis datum associated with a first security identifier following areceipt of a message informative of at least one capital event, thesystem comprising: a microprocessor; a display coupled to themicroprocessor, the display displaying a graphical user interfaceshowing a purchase date datum, a sale date datum, and an originalpurchased shares datum representative of an original number of purchasedshares of a security associated with the first security identifier; adatabase coupled to the microprocessor and storing information forretrieval via the microprocessor, wherein the information isrepresentative of a purchase price per share of the security associatedwith the first security identifier corresponding to the purchase datedatum, a plurality of capital events datums determined to have occurredbetween dates associated with the purchase date datum and the sale datedatum, a plurality of shares held adjustment ratios, a first updatedcost basis datum, and a first updated number of shares datumrepresentative of a first updated number of shares of the securityassociated with the first security identifier, wherein each of theplurality of shares held adjustment ratios corresponding to one of theplurality of capital events datums, wherein the microprocessorgenerating a first cost basis datum via combining the purchase pricedatum with the original purchased shares datum, wherein themicroprocessor determining the first updated cost basis datum and thefirst updated number of the shares datum via a first shares heldadjustment ratio processed via the microprocessor, using the originalpurchased shares datum, the microprocessor correlating the first sharesheld adjustment ratio to the first security identifier, wherein themicroprocessor determining a second updated cost basis datum and asecond updated number of the shares datum via a second shares heldadjustment ratio processed via the microprocessor, using the firstupdated purchased shares datum, the microprocessor correlating thesecond shares held adjustment ratio to a second security identifier,wherein microprocessor correlates the second security identifier to thefirst security identifier using a primary key, wherein each of themicroprocessor determines the chronological order of the plurality ofcapital events datums using the first security identifier, the secondsecurity identifier, and the primary key, and the microprocessorprocesses the plurality of capital events, that occur between the datesassociated with the purchase date datum and the sale date datum,respectively, in a chronological order, such that a shares heldadjustment ratio for a capital event datum that is represented toimmediately precede another shares held adjustment ratio for anothercapital event datum, is processed, via the microprocessor, using a thencurrent cost basis datum to calculate a next current cost basis datum,chronologically, until each of the shares held adjustment ratios isutilized, resulting in the determination of a final updated cost basisdatum; and wherein the display displaying the final updated cost basisdatum and a final updated number of shares datum.
 10. The system fordetermining a cost basis for a security according to claim 9, whereinthe capital event comprises a transaction altering the number of sharesassociated with the first cost basis.
 11. The system for determining acost basis for a security according to claim 9, wherein themicroprocessor is further configured to generate informationrepresentative of a capital gain or loss associated with the finalupdated cost basis.
 12. The system for determining a cost basis for asecurity according to claim 9, wherein the microprocessor is furtherconfigured to assign an internal identification value to the securityinformation stored in the database to track the security.
 13. The systemfor determining a cost basis for a security according to claim 12,wherein the internal identification value correlates to at least one ofa stock symbol and a Committee on Uniform Security IdentificationProcedures (CUSIP) number.
 14. The method for updating a cost basisaccording to claim 1, further comprising transferring, via the computer,the third cost basis to a tax preparation software program; wherein thethird cost basis is used by the tax preparation software to prepare atax return.
 15. The method for updating a cost basis according to claim12, further comprising transferring, via the computer, data relating tothe determination of the third cost basis to a tax preparation softwareprogram.
 16. The method for updating a cost basis according to claim 1,further comprising calculating one or more additional cost bases by thecomputer, wherein one or more additional shares held adjustment ratiosis processed, via the computer, using the one or more additional costbases, respectively, in chronological order, such that the shares heldadjustment ratio of the one or more shares held adjustment ratios thatimmediately precedes another shares held adjustment ratio of the one ormore shares held adjustment ratios, chronologically, is processed, viathe computer, using then current cost basis to calculate the nextcurrent cost basis, until all of the one or more shares held adjustmentratios is utilized, resulting in the calculation of a final cost basis.17. The method for updating a cost basis according to claim 16, furthercomprising transferring, via the computer, the final cost basis to a taxpreparation software program; wherein the final cost basis is used bythe tax preparation software to prepare a tax return.
 18. The method forupdating a cost basis according to claim 17, further comprisingtransferring, by the computer, data relating to the determination of thefinal cost basis to the tax preparation software program.
 19. The methodfor updating a cost basis according to claim 16, further comprisingdetermining a security from a plurality of securities to sell byupdating the cost basis for the plurality of securities and determininga preferred result by selling one of the plurality of securities ascompared to selling each of the other or the plurality of securities.20. A system comprising: a database comprising a first table, a secondtable, and a third table, wherein the first table stores a primary keyand a security identifier corresponding to the primary key, wherein thesecond table stores a first capital event identifier related to thesecurity identifier, a second capital event identifier related to thesecurity identifier, a first shares held adjustment ratio correspondingto the first capital event identifier, and a second shares heldadjustment ratio corresponding to the second capital event identifier,wherein the first shares held adjustment ratio corresponds to the firstcapital event identifier, wherein the second shares held adjustmentratio corresponds to the second capital event identifier, wherein theprimary key is associated with the first capital event identifier andthe second capital event identifier, wherein the third table storesprice information corresponding to the security identifier, wherein thefirst table, the second table, and the third table are related to eachother via the primary key; a server computer coupled to the database,wherein the server computer is configured to: contemporaneously receivea first request from a first client computer over a network and a secondrequest from a second client computer over the network, wherein thefirst request is associated with a first portfolio representation in thedatabase, wherein the second request is associated with a secondportfolio representation in the database, wherein the first portfoliorepresentation comprises a first plurality of security identifiers,wherein the second portfolio comprises a second plurality of securityidentifiers, wherein the first request comprises a first set ofinformation, wherein the second request comprises a second set ofinformation, wherein each of the first set of information and the secondset of information comprises a security symbol, a first number of sharesdatum associated with the security symbol, a price per share datumassociated with the security symbol and to a first date, and a costbasis determination start date, in response to a contemporaneous receiptof the first request from the first client computer over the network andthe second request from the second client computer over the network, foreach security identifier of the first security identifiers and thesecond security identifiers: identify the security identifiercorresponding to the security symbol based on the primary key viacommunicating with the database, determine, based on the primary key, afirst cost basis datum based on the price per share datum associatedwith the first date, the cost basis determination start date datum, andthe first number of shares datum, identify the first capital event datumand the first shares held adjustment ratio which corresponds to theprimary key based on the first identifier via communicating with thedatabase, determine, based on the primary key, a second cost basis datumand a second number of shares associated with the security identifierbased on the first cost basis datum, the first capital event datum, andthe first shares held adjustment ratio, identify the second capitalevent datum and the second shares held adjustment ratio whichcorresponds to the primary key based on the second identifier viacommunicating with the database, determine, based on the primary key, athird cost basis datum and a third number of shares associated with thesecurity identifier based on the second cost basis datum, the secondcapital event datum, and the second shares held adjustment ratio, inresponse to determining the third cost basis datum and the third numberof shares datum for each security identifier of the first securityidentifiers and the second security identifiers, for each of the firstportfolio representation and the second portfolio representation: send afirst response over the network to the first client computer based onthe first request and a second response over the network to the secondclient computer based on the second request, wherein the first responseis associated with the first portfolio representation, wherein thesecond response is associated with the second portfolio representation,wherein the first response comprises the third cost basis datum and thethird number of shares datum for each respective security identifier inthe first portfolio representation such that the first client computeris able to display the third cost basis datum and the third number ofshares datum for each respective security identifier in the firstportfolio representation, wherein the second response comprises thethird cost basis datum and the third number of shares datum for eachrespective security identifier in the second portfolio representationsuch that the second client computer is able to display the third costbasis datum and the third number of shares datum for each respectivesecurity in the second portfolio representation.